Reply by Jon Hobbs

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Posted on Please Advise I'm new to woodworking

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Jon Hobbs

147 posts in 1588 days

#1 posted 08-11-2016 07:27 PM

Hey Philip, welcome to the club!

If you’re considering a business, even a side business, I highly recommend some business education. You don’t have to start hanging out with the Gordon Gekko wannabes at the business school. But acquire some knowledge about putting together a business plan. The Small Business Administration is a good place to start. Many states also provide resources (books, seminars, mentors) to people like yourself that are pondering, or already building a new business. At a minimum, get a good book on building a business plan and study it. Take it to heart.

There’s some good advice here on looking at the market to see what price is reasonable. But that’s only half of the equation. The other half is how much will it cost to make and deliver your product to the customer? Most people without any business management training or experience only consider the cost of materials that go into the item they’re selling. Successful business people know that’s just the tip of the iceberg. People who seek out and pay heed to some basic small business management training also know this.

There’s also utility costs (your CNC machine uses energy of some sort, right?), insurance (what happens if one of your frames falls apart and a piece lands on someone’s head causing a concussion and they decide to sue you for $5 million?), marketing (if you build it, they will NOT come. Unless you market the crap out of it), wear and tear on your machines, your labor, shipping, etc.

Putting together a solid business plan, or at least knowing what goes into a solid business plan, will help you identify all the costs associated by your side business. Many people make the mistake of underestimating the impact of their “side” business. They ignore or minimize all the financial impacts of their business because it’s a “side” business. Afterall, they have a regular paycheck coming in to cover their living expenses! Then suddenly, they’re spending every single minute they’re not at their day job running the “side” business (maybe even burning paid time off to run the side business) and they’re dead-busted-broke and can’t pay the electric bill. They’re baffled and scratching their heads as to why.

Since you’re a college student, I assume you don’t have a giant pile of liquid assets (aka cash) laying around (open credit on a credit card is not a liquid asset!). So you need to be extra diligent and proactive about planning for the impact of your side business.

I realise I didn’t directly answer any of your questions :) However, without a good grasp of basic business concepts, you’ll be out of business, and out of money, so fast, that your questions won’t even be relevant.

-- Jon -- Just a Minnesota kid hanging out in Kansas

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